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Government’s Debt-Financing Schemes for Starting a Business in Singapore

Whenever it comes to establishing a new company, fledgling entrepreneurs often recognize that the lack of adequate funds is the major hindrance for a successful start. However, one does not recognize this fact while setting up a new company in Singapore. Incidentally, the Singapore government is playing a big role in making the nation as a corporate friendly from all possible angles by giving enterprise development top priority in its agenda.

The government has created a supportive and enterprise-friendly environment for both local and foreign entrepreneurs willing to start a business in the country. To be specific, starting a company or business here can bring in several benefits such as first-rate infrastructure, readily available personnel, low-tax system, and lack of bureaucracy. Apart from that, there are many initiatives to gain the desired funds, including the debt financing schemes.

Introduction to Debt Financing Schemes

Debt financing is a feasible start-up preference of entrepreneurs who desire to increase capital without compromising their share of profits. The only stumbling block here is the timely loan repayments and that the borrowers are indebted to finance providers, regardless of whether the establishment or venture is giving profits or not. Considering the conventional debt financing sources, they include family, friends, and other private options. Nevertheless, these are not the only options you have, as there are several government debt-financing options in Singapore, which are meant especially for small and medium enterprises(SMEs).

The Different Schemes to Take Advantage of

Although the schemes of debt financing are for SMEs, the start-ups that tend to fulfill the qualifying criteria are also eligible. Listed below are the different Government debt-financing schemes you can avail in Singapore:

Loan Insurance Scheme (LIS)

This scheme helps in ensuring loans against a variety of risks by sharing the insurance premium with the new enterprise. With no maximum quantum on loans, the scheme is available for both domestic and abroad ventures. Depending upon the borrower’s risk profile, the insurer decides the interest rate, premium rate, and tenure. Further, the partaking financial institutions determine the collateral and repayment structures. What you will admire the most of this scheme is that the government willingly shares 50% of the premium with your new enterprise.

Micro-Loan Program (MLP)

This scheme enables the partaking financial institutions and banks (lenders) to offer loans of up to S$100,000 to the qualified Singapore firms. Such loans are especially given for the daily operations or for upgrading equipment or factory infrastructure. In most cases, the SMEs need to pay at least 5.75% interest on a loan that is for a period of  less than four years.

Local Enterprise Finance Scheme (LEFS)

In this scheme, the partaking lenders such as financial organizations and banks are allowed to offer loans of up to S$15 million to qualified Singapore firms. These loans are for upgrading factory and equipment, premises, construction equipment, and/or purchasing a new area of operation. Herein, a minimum interest rate of 4.75% is charged for a loan of less than four years and 5.25% for loans over four years.

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